BILL NUMBER: S1770

SPONSOR: SKOUFIS
 
TITLE OF BILL:

An act to amend the general municipal law, in relation to requiring the
return of all or a part of the financial assistance provided for a
project where the project has material shortfalls or material violations
and preventing the use of funds, financial incentives, subsidies or tax
exemptions for projects already in development

 
PURPOSE:

This bill will require that industrial development agencies (IDAs)
implement policies for the return of financial assistance or tax incen-
tives provided to a project that is determined to show material short-
falls in job creation and retention or material violations of the
project agreement. It also prohibits IDAs from offering financial
assistance to projects that are already in development at the time of an
application. Additionally, this bill requires the standard financial
assistance application used by IDAs to require the disclosure of offers
of financial assistance from out of state economic development corpo-
              

rations.

 
SUMMARY OF PROVISIONS:

Section 1: Amends subdivision 11 of section 874 of the general municipal
law to require that local industrial, development agencies implement
their policies for return of financial assistance or tax incentives
provided to a project whenever the agency's annual assessment shows
material shortfalls in job creation and retention projections or materi-
al violations of the terms and conditions of the project agreement. Adds
new subdivision 13, stating that IDAs may not grant tax exemptions to a
project already in development unless environmental contamination
requiring a significant increase in project costs has been discovered
during the development of a project or where a municipality has reas-
sessed all or part of the project site resulting in an increase in prop-
erty taxes of more than 50A.

Section 2: Amends section 854 of the general municipal law by adding a
new subdivision 21 defining the term "in development."

Section 3: Amends section 862 of the general municipal law to add a new
subdivision 3, stating that IDAs may not give financial incentives or
subsidies to a project already in development unless environmental
contamination requiring a significant increase in project costs has been
discovered during the development of a project or where a municipality
has reassessed all or part of the project site resulting in an increase
in property taxes of more than 50%.

Section 4: Amends subdivision 4 of section 859-a of the general munici-
pal law to add a new paragraph (j), requiring that if a project appli-
cant has received an offer of financial assistance from an economic
development corporation or corporations located outside of the state
that such project applicant disclose and provide such offer.

Section 5: Effective date.

 
JUSTIFICATION:
Governor Nelson Rockefeller enacted IDAs in 1969 for the purpose of
incentivizing economic activities in New York State by issuing financial
assistance to private companies, primarily in the form of tax breaks.

While reasonable incentives are occasionally necessary to attract or
retain business, the extent to which IDAs have been providing question-
able benefits brings into question whose interests are being served by
the system. Projects requesting financial assistance are frequently
approved with minimal scrutiny and little community input.  This system
appears to often favor the interests of business without sufficiently
examining if the public interest is being met.

IDAs often grant private companies financial assistance in return for
economic benefit, typically a promise to create or retain jobs in the
community. IDAs are required to annually evaluate the success of each
project at meeting the job and economic metrics agreed to as a condition
of financial assistance. Additionally, they must develop policies for
the return of all or part of the financial assistance provided for a
project in the event that a project has material shortfalls in job
creation and retention or material violations of the conditions of the
agreement. However, IDA boards have the discretion to implement such
policies and compel the return of taxpayer funds.  Too often, projects
fall significantly short of their benefit promises, distressing the
economic welfare of local communities. This bill proposes to address
this abuse by requiring IDA boards to compel the return of taxpayer-
funded incentives issued to underperforming projects.

The purpose of IDAs is to incentivize companies to relocate or remain in
its community through the offer of financial assistance. However, it is
important to prevent IDAs from placing the interests of companies ahead
of the public trust, which they are designed to serve. The mission of an
IDA should be to not simply incentivize for the sake of incentivizing,
but to maximize a community's benefit, particularly when it comes to the
project's ratable. While determining the seriousness of a threat to
locate or relocate elsewhere can be a difficult and often subjective
process, such scrutiny will benefit the taxpayers that IDAs are formed
to represent. This bill would prevent companies that threaten relocation
despite already being under-construction from receiving any unjustified
financial incentives.

Companies often "shop around," using threats of relocation and abandon-
ment to get the best financial benefit from possible from IDAs. This
bill proposes to prevent such abuse by requiring applicants for finan-
cial assistance provided by IDAs disclosure any financial incentive
offers from economic development corporations out of New York State.

 
LEGISLATIVE HISTORY:

2020 - S8960 Referred to Rules Assembly

2020 - A11003 Referred to Local Governments

 
FISCAL IMPLICATIONS:

None to the state. The return of financial assistance granted by indus-
trial development agencies to underperforming projects will benefit
local taxpayers.

 
EFFECTIVE DATE:
This act shall take effect immediately.